India’s Trade Of Good Hope: Africa

Prime Minister Narendra Modi with African leaders at the 3rd India-Africa Forum Summit in New Delhi on October 28, 2015. Image: PIB

“Africa and India are the two bright spots of hope and opportunities in the global economy,” Prime Minister Modi said during the inaugural ceremony of the recently concluded India-Africa Forum Summit (IAFS).

Africa is of strategic importance to India in terms of economic and commercial engagement in addition to security and defence cooperation.

The continent is rich and abundant in natural and mineral resources with many regions yet to be explored.

It is the second-most populous (1.2 billion people) continent in the world and the second-fastest growing economic region after Asia.

Its overall growth (gross domestic product) is expected to accelerate from 4% in 2014 to almost 5% in 2017.

The annual average income of Africans is growing at almost twice the global average rate. The net wealth per adult in Africa increased 56% from $2,916 in 2000 to $4,536 in 2015, according to Credit Suisse Global Wealth Report 2015.

Consumer spending in Africa was $860 billion in 2008, expected to grow to $1.4 trillion by 2020.

India’s trade with Africa rises steadily

India’s exports to Africa increased 65% from $20 billion in 2010-11 to $33 billion in 2014-15. Imports from Africa are up 22% from $32 billion in 2010-11 to $39 billion in 2014-15.

It is important to note that crude oil is Africa’s single-largest exported product in terms of value. India’s major imports from the region include crude petroleum products, edible fruits and precious stones.

West Africa is the most important region in terms of trade, contributing almost 38% of total African trade ($27 billion) in 2014-15.

It is India’s largest trading region in Africa with 22 nations, including major trading partners such as Nigeria ($14 billion) and Ghana ($1 billion).

The region also contributed 51% ($20 billion) of total imports from Africa to India in 2014-15.

The Southern African Customs Union ($13 billion) is the second-largest trading region, with an 18% share of African trade. The important trading nations from this region include South Africa and Botswana.

East Africa is the largest market for Indian goods, contributing 30% ($10 billion) of India’s total exports to Africa. Kenya ($4 billion), Tanzania ($2 billion) and Mauritius ($2 billion) are India’s major export destinations in this region.

Nigeria is India’s largest trading partner in Africa with a total trade worth $16 billion in 2014-15. The country is important to India in terms of crude oil and energy security.

Exports to South Africa include vehicles, transport equipment, drugs and pharmaceuticals, gems and jewellery, engineering goods and rice.

South Africa is India’s second-largest trading partner with a total trade of $12 billion in 2014-15. It is also India’s second-largest import ($6 billion) and leading export ($5 billion) destination in Africa.

The top five countries account for 58% of bilateral trade with the African continent.

Huge jump in Indian investments

India’s foreign direct investment (FDI) in Africa was reported to be over $12 billion in 2014 compared to $4 billion in 2013.

Eastern Africa was the largest recipient of Indian FDI in 2014, valued at $5 billion. It is assumed that most of these investments flow through Mauritius as FDI to Africa.

North Africa received Indian FDI worth $4 billion in 2014, followed by Southern Africa ($3 billion).

India announced a new line of credit to Mauritius worth $500 million in March 2015 for civilian infrastructure projects.

India assured additional concessional credit of $10 billion over the next five years to strengthen partnership with African nations during the recently concluded IAFS summit. India will also offer grants of $600 million, which will include an India-Africa Development Fund of $100 million and an India-Africa Health Fund of $10 million.

Can India meet China’s challenge in Africa?

India’s initiative to build ties with African nations is seen by many as a counter to China’s dominance in the region.

China’s trade with Africa was reported to be $200 billion in 2014, while India just reached the $72 billion mark in 2014-15.

India announced investments worth $5 billion in 2013, declining to $1 billion in 2014. China’s investments in greenfield projects increased to $6 billion in 2014 from $0.3 billion in 2013.

(Mallapur is a policy analyst with IndiaSpend.)

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